Opinion Shadow-boxing in the dark

The umpteenth resurrection of the nuclear liability bill issue,this time just before Singh’s departure to the US,is the latest example. The beleaguered government has resorted to its stated position of upholding the law,without even making the point that the controversial legal opinion in question had nothing to do with the negotiations with the US-based operator,Westinghouse. Not just that,the subject is also not part of any Cabinet Committee on Security note. It must be considered part of UPA 2’s growing list of failures that while it set out to bring nuclear power to the country,it has been derailed by disproportionate attention to issues that will count for little in case of a nuclear disaster.

Regardless of what the fine print says,the fact is that the liability in such an event rests with the government and only with the government. This is not a legal requirement,but a political obligation that cannot be absolved through a clause in the Civil Liability for Nuclear Damage Act. And more so in India’s case,because the operator,Nuclear Power Corporation of India Ltd,is also a state-owned public sector unit. All references to NPCIL,as operator,coughing up Rs 1,500 crore in damages,is meaningless in the end because the coffers are the same — those of the government.

By the same logic,section 17 of the act,which provides the operator the right of recourse to the supplier on taking up the burden of liability,will be difficult to translate on ground. Given the magnitude of such disasters,no supplier will ever be in a position to bear the compensation amount,a fact that led to the death of the global nuclear industry until it was revived in the 1990s. The discussion on reviving nuclear power dwelled on this issue at length,with suppliers making it clear they could not be held accountable for any accident or disaster as their association with the product ends after they hand it over to the operator. International regulators realised that this was the biggest deterrent to investment,and therefore production,in the sector.

The International Atomic Energy Agency was the site of several rounds of deliberations on exactly these concerns and finally,it was agreed that the operator,not the supplier,would bear responsibility for liability. This is now an established global principle. Even China,which is now poised to take a big lead over India in this sector,has made it clear that the operator is responsible but may exercise a right of recourse based on the provisions of the contract.

If any partaking of liability has to happen,it will be at the contractual level. The rationale is that as far as the public is concerned,the operator has to provide the compensation. That the operator may,in turn,enter into arrangements to share the burden with suppliers or anyone else is not an issue that should concern the victims. The Indian act also conveys a similar spirit,but the insistence on making this burden-sharing mandatory has created concerns among commercial suppliers — foreign and domestic — that it would override any provision in the contract that the companies negotiate with the operator.

So,should that negotiating space be shrunk or made meaningless by mandatory legal bars? This is an important question,because if the government will eventually have to take the lead in case of a disaster,regardless of what the law or a contract says,why is there this insistence on tying-in suppliers in a way that makes them uncertain of their financial and legal obligations? This is where one has to return to the nuclear deal debate.

The argument is that taxpayer money will be utilised to compensate for a disaster even if the fault lies with a supplier product. That company,be it Areva,Westinghouse or even the local generator maker,should pay up. Having accepted this principle,all suppliers interested in doing business in India are planning elaborate insurance arrangements. Then,they will factor this into their cost of per unit power. As a result,the initial bid from Westinghouse is just over Rs 12 per kilowatt hour. The charge is back on the taxpayer — the only difference is you don’t have to wait for a nuclear disaster to pay up.

Once this happens,it feeds into the other argument made during the N-deal debate — nuclear power is expensive,and therefore unviable. In a circuitous yet effective way,the larger purpose of the nuclear deal stands betrayed,serving only current stakeholders by allowing them access to the international nuclear fuel market and,perhaps,memberships to some important international scientific bodies.

The key is to find creative solutions,like adding predictability to suppliers’ obligations by limiting liability to a time-frame,just like guarantee and warranty periods. Or the American-style creation of a corpus where even the supplier could be asked to contribute. If the purpose of the debate is to provide the best compensation options to victims,several innovative ways can be found in the marketplace between the consumer,operator and supplier community. But if the purpose is to thwart the entry of nuclear power,then the fine print of section 17 is the best available legal weapon.

As for Singh,he will have to miraculously discover political heft to make India swim with the global tide on nuclear energy and resurrect a sinking nuclear deal. Else,his government will have done the other,wondrous task of snatching defeat from the brink of victory.

pranab.samanta@expressindia.com